MERRILL LYNCH, PIERCE, FENNER & SMITH INC. v. DABIT

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Syllabus
MERRILL LYNCH, PIERCE, FENNER & SMITH INC.
v. DABIT
certiorari to the united states court of appeals for
the second circuit
No. 04–1371. Argued January 18, 2006—Decided March 21, 2006
Respondent Dabit filed a private securities fraud class action in federal
court, invoking diversity jurisdiction to advance his state-law claims
that petitioner, his former employer, fraudulently manipulated stock
prices, causing him and other brokers and their clients to keep their
overvalued securities. The District Court dismissed his amended com
plaint, finding his claims pre-empted by Title I of the Securities Litiga
tion Uniform Standards Act of 1998 (SLUSA), which provides that no
“covered class action” based on state law and alleging “a misrepresenta
tion or omission of a material fact in connection with the purchase or
sale of a covered security” “may be maintained in any State or Federal
court by any private party.” 15 U. S. C. § 78bb(f)(1)(A). Vacating the
judgment, the Second Circuit concluded that, to the extent the com
plaint alleged that brokers were fraudulently induced, not to sell or
purchase, but to retain or delay selling, it fell outside SLUSA’s pre
emptive scope.
Held: The background, text, and purpose of SLUSA’s pre-emption provi
sion demonstrate that SLUSA pre-empts state-law holder class-action
claims of the kind Dabit alleges. Pp. 78–89.
(a) The magnitude of the federal interest in protecting the integrity
and efficiency of the national securities market cannot be overstated.
The Securities Act of 1933 and the Securities Exchange Act of 1934
(1934 Act) anchor federal regulation of vital elements of this Nation’s
economy. Securities and Exchange Commission (SEC) Rule 10b–5,
which was promulgated pursuant to § 10(b) of the 1934 Act, is an impor
tant part of that regulatory scheme, and, like § 10(b), prohibits decep
tion, misrepresentation, and fraud “in connection with the purchase or
sale” of a security. When, in Blue Chip Stamps v. Manor Drug Stores,
421 U. S. 723, this Court limited the Rule 10b–5 private right of action
to plaintiffs who were themselves purchasers or sellers, it relied on the
widespread recognition that suits by nonpurchasers and nonsellers pre
sent a special risk of vexatious litigation that could “frustrate or delay
normal business activity,” id., at 740. Pp. 78–81.
(b) Similar policy considerations prompted Congress to adopt legisla
tion (Reform Act) targeted at perceived abuses of class actions—e. g.,

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nuisance filings and vexatious discovery requests—but this effort
prompted members of the plaintiffs’ bar to avoid the federal forum alto
gether. To stem the shift of class actions from federal to state courts,
Congress enacted SLUSA. Pp. 81–82.
(c) Both the class and the securities here are “covered” within
SLUSA’s meaning, and the complaint alleges misrepresentations and
omissions of material facts. The only disputed issue is whether the
alleged wrongdoing was “in connection with the purchase or sale” of
securities. Dabit’s narrow reading would pre-empt only those actions
in which Blue Chip Stamps’ purchaser-seller requirement is met. Inso
far as that argument assumes that the Blue Chip Stamps rule stems
from Rule 10b–5’s text, it must be rejected, for the Court relied on
“policy considerations” in adopting that limitation, and it purported to
define the scope of a private right of action under Rule 10b–5, not to
define “in connection with the purchase or sale.” When this Court has
sought to give meaning to that phrase in the § 10(b) and Rule 10b–5
context, it has broadly required that the alleged fraud “coincide” with a
securities transaction, an interpretation that comports with the SEC’s
longstanding views. Congress can hardly have been unaware of this
broad construction when it imported the phrase into SLUSA. Where
judicial interpretations have settled a statutory provision’s meaning,
repeating the same language in a new statute indicates the intent to
incorporate the judicial interpretations as well. That presumption is
particularly apt here, because Congress not only used § 10(b)’s and Rule
10b–5’s words, but used them in another provision appearing in the
same statute as § 10(b). The presumption that Congress envisioned a
broad construction also follows from the particular concerns that culmi
nated in SLUSA’s enactment, viz., preventing state private securities
class-action suits from frustrating the Reform Act’s objectives. A nar
row construction also would give rise to wasteful, duplicative litigation
in state and federal courts. The presumption that “Congress does not
cavalierly pre-empt state-law causes of action,” Medtronic, Inc. v. Lohr,
518 U. S. 470, 485, has less force here because SLUSA does not pre-empt
any cause of action. It simply denies the use of the class-action device
to vindicate certain claims. Moreover, tailored exceptions to SLUSA’s
pre-emptive command—for, e. g., state agency enforcement proceed
ings—demonstrate that Congress did not act cavalierly. Finally, fed
eral, not state, law has long been the principal vehicle for asserting
class-action securities fraud claims. Pp. 82–88.
(d) Dabit’s holder class action is distinguishable from a typical Rule
10b–5 class action only in that it is brought by holders rather than
sellers or purchasers. That distinction is irrelevant for SLUSA pre
emption purposes. The plaintiffs’ identity does not determine whether

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Syllabus
the complaint alleges the requisite fraud, and the alleged misconduct
here—fraudulent manipulation of stock prices—unquestionably qualifies
as a fraud “in connection with the purchase or sale” of securities as the
phrase is defined in SEC v. Zandford, 535 U. S. 813, 820, and United
States v. O’Hagan, 521 U. S. 642, 651. Pp. 88–89.
395 F. 3d 25, vacated and remanded.
Stevens, J., delivered the opinion of the Court, in which all other Mem
bers joined, except Alito, J., who took no part in the consideration or
decision of the case.
Jay B. Kasner argued the cause for petitioner. With him
on the briefs were Preeta D. Bansal, Edward J. Yodowitz,
Scott D. Musoff, and Joanne Gaboriault.
Deputy Solicitor General Hungar argued the cause for
the United States as amicus curiae urging reversal. With
him on the brief were Solicitor General Clement, Daryl Jo
seffer, Giovanni P. Prezioso, Jacob H. Stillman, Eric Sum
mergrad, Susan S. McDonald, and Jeffrey T. Tao.
David C. Frederick argued the cause for respondent.
With him on the brief were Priya R. Aiyar, William B. Fed
erman, Stuart W. Emmons, and Clell I. Cunningham III.*
*Briefs of amici curiae urging reversal were filed for the Chamber of
Commerce of the United States of America by Charles A. Rothfeld, An
drew J. Pincus, Stephen M. Shapiro, Timothy S. Bishop, Robin S. Conrad,
and Amar D. Sarwal; for the Investment Company Institute by Theodore
B. Olson and Mark A. Perry; for Lord, Abbett & Co. et al. by Charles Lee
Eisen, Jeffrey B. Maletta, and Nicholas G. Terris; for the Securities In
dustry Association et al. by Carter G. Phillips and Richard D. Bernstein;
and for the Washington Legal Foundation by Donald B. Verrilli, Jr., Ron
ald L. Marmer, C. John Koch, Daniel J. Popeo, and David Price.
Briefs of amici curiae urging affirmance were filed for the State of New
York et al. by Eliot Spitzer, Attorney General of New York, Caitlin J.
Halligan, Solicitor General, and Mariya S. Treisman, Assistant Solicitor
General, and by the Attorneys General for their respective States as fol
lows: Bill Lockyer of California, Richard Blumenthal of Connecticut,
Mark J. Bennett of Hawaii, Lisa Madigan of Illinois, Thomas J. Miller of
Iowa, Michael A. Cox of Michigan, Mike Hatch of Minnesota, Jim Hood
of Mississippi, Mike McGrath of Montana, Peter C. Harvey of New Jersey,
Patricia A. Madrid of New Mexico, Jim Petro of Ohio, W. A. Drew

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Opinion of the Court
Justice Stevens delivered the opinion of the Court.
Title I of the Securities Litigation Uniform Standards Act
of 1998 (SLUSA) provides that “[n]o covered class action”
based on state law and alleging “a misrepresentation or
omission of a material fact in connection with the purchase
or sale of a covered security” “may be maintained in any
State or Federal court by any private party.” § 101(b), 112
Stat. 3230 (codified at 15 U. S. C. § 78bb(f)(1)(A)). In this
case the Second Circuit held that SLUSA only pre-empts
state-law class-action claims brought by plaintiffs who have
a private remedy under federal law. 395 F. 3d 25 (2005). A
few months later, the Seventh Circuit ruled to the contrary,
holding that the statute also pre-empts state-law class-action
claims for which federal law provides no private remedy.
Kircher v. Putnam Funds Trust, 403 F. 3d 478 (2005). The
background, the text, and the purpose of SLUSA’s pre
emption provision all support the broader interpretation
adopted by the Seventh Circuit.
I
Petitioner Merrill Lynch, Pierce, Fenner & Smith Inc.
(Merrill Lynch) is an investment banking firm that offers re
search and brokerage services to investors. Suspicious that
the firm’s loyalties to its investment banking clients had
produced biased investment advice, the New York attorney
general in 2002 instituted a formal investigation into Merrill
Edmondson of Oklahoma, Hardy Myers of Oregon, Henry McMaster of
South Carolina, William H. Sorrell of Vermont, Rob McKenna of Wash
ington, and Peggy A. Lautenschlager of Wisconsin; for IJG Investments
et al. by Ira Neil Richards; for the National Association of Shareholder
and Consumer Attorneys et al. by Stewart M. Weltman, Kevin P. Roddy,
and Deborah M. Zuckerman; and for Phillip Goldstein et al. by Robert
L. King.
Steven B. Feirson and Nory Miller filed a brief for Pacific Life Insur
ance Co. as amicus curiae.

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Lynch’s practices. The investigation sparked a number of
private securities fraud actions, this one among them.1
Respondent, Shadi Dabit, is a former Merrill Lynch bro
ker. He filed this class action in the United States District
Court for the Western District of Oklahoma on behalf of him
self and all other former or current brokers who, while em
ployed by Merrill Lynch, purchased (for themselves and for
their clients) certain stocks between December 1, 1999, and
December 31, 2000. See App. 27a–46a. Rather than rely
on the federal securities laws, Dabit invoked the District
Court’s diversity jurisdiction and advanced his claims under
Oklahoma state law.
The gist of Dabit’s complaint was that Merrill Lynch
breached the fiduciary duty and covenant of good faith and
fair dealing it owed its brokers by disseminating misleading
research and thereby manipulating stock prices.2 Dabit’s
theory was that Merrill Lynch used its misinformed brokers
to enhance the prices of its investment banking clients’
stocks: The research analysts, under management’s direction,
allegedly issued overly optimistic appraisals of the stocks’
value; the brokers allegedly relied on the analysts’ reports
in advising their investor clients and in deciding whether or
not to sell their own holdings; and the clients and brokers
both continued to hold their stocks long beyond the point
when, had the truth been known, they would have sold. The
complaint further alleged that when the truth was actually
revealed (around the time the New York attorney general
instituted his investigation), the stocks’ prices plummeted.
1 Merrill Lynch eventually settled its dispute with the New York attor
ney general.
2 The complaint alleged, for example, that the prices of the subject
stocks were “artificially inflated as a result of the manipulative efforts” of
Merrill Lynch, and that Merrill Lynch, “acting as a central nerve center
in the manipulation of various stocks . . . , perpetrated this stock manipula
tion through a variety of deceptive devices, artifices, and tactics that are
the hallmarks of stock manipulation.” App. 28a–29a.

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Dabit asserted that Merrill Lynch’s actions damaged the
class members in two ways: The misrepresentations and
manipulative tactics caused them to hold onto overvalued
securities, and the brokers lost commission fees when their
clients, now aware that they had made poor investments,
took their business elsewhere.
In July 2002, Merrill Lynch moved to dismiss Dabit’s com
plaint. It argued, first, that SLUSA pre-empted the action
and, second, that the claims alleged were not cognizable
under Oklahoma law. The District Court indicated that it
was “not impressed by” the state-law argument, but agreed
that the federal statute pre-empted at least some of Dabit’s
claims. Id., at 49a–50a. The court noted that the complaint
alleged both “claims and damages based on wrongfully
induced purchases” and “claims and damages based on
wrongfully-induced holding.” Ibid. While the “holding”
claims, the court suggested, might not be pre-empted, the
“purchasing” claims certainly were. The court dismissed
the complaint with leave to amend to give Dabit the opportu
nity to untangle his “hopeless me´ lange of purchase-related
and holding-related assertions.” Ibid. (punctuation added).
Dabit promptly filed an amended complaint that omitted
all direct references to purchases. What began as a class of
brokers who “purchased” the subject securities during the
class period became a class of brokers who “owned and con
tinued to own” those securities. See id., at 52a.
Meanwhile, dozens of other suits, based on allegations sim
ilar to Dabit’s, had been filed against Merrill Lynch around
the country on both federal- and state-law theories of liabil
ity. The Judicial Panel on Multidistrict Litigation trans
ferred all of those cases, along with this one, to the United
States District Court for the Southern District of New York
for consolidated pretrial proceedings. Merrill Lynch then
filed its second motion to dismiss Dabit’s complaint. Senior
Judge Milton Pollack granted the motion on the ground that
the claims alleged fell “squarely within SLUSA’s ambit.”

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In re Mer r ill Lynch & Co., Inc., 2003 WL 1872820, *1
(Apr. 10, 2003).
The Court of Appeals for the Second Circuit, however, va
cated the judgment and remanded for further proceedings.
395 F. 3d, at 51. It concluded that the claims asserted by
holders did not allege fraud “in connection with the purchase
or sale” of securities under SLUSA. Although the court
agreed with Merrill Lynch that that phrase, as used in other
federal securities laws, has been defined broadly by this
Court, it held that Congress nonetheless intended a nar
rower meaning here—one that incorporates the “standing”
limitation on private federal securities actions adopted in
Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723
(1975). Under the Second Circuit’s analysis, fraud is only
“in connection with the purchase or sale” of securities, as
used in SLUSA, if it is alleged by a purchaser or seller of
securities. Thus, to the extent that the complaint in this
action alleged that brokers were fraudulently induced, not to
sell or purchase, but to retain or delay selling their securi
ties, it fell outside SLUSA’s pre-emptive scope.3
Af ter determining that the class defined in Dabit’s
amended complaint did not necessarily exclude purchasers,
the panel remanded with instructions that the pleading be
dismissed without prejudice. The court’s order would per
mit Dabit to file another amended complaint that defines the
class to exclude “claimants who purchased in connection with
the fraud and who therefore could meet the standing require
ment” for a federal damages action, and to include only those
“who came to hold [a Merrill Lynch] Stock before any rele
vant misrepresentation.” 395 F. 3d, at 45–46. Under the
Second Circuit’s analysis, a class action so limited could be
3 The Court of Appeals also concluded that Dabit’s lost commission
claims escaped pre-emption under SLUSA because they did not “allege
fraud that ‘coincide[s]’ with the sale or purchase of a security.” 395 F. 3d,
at 47 (quoting SEC v. Zandford, 535 U. S. 813, 825 (2002)). That determi
nation is not before this Court for review.

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sustained under state law. For the reasons that follow, we
disagree.
II
The magnitude of the federal interest in protecting the
integrity and efficient operation of the market for nationally
traded securities cannot be overstated. In response to the
sudden and disastrous collapse in prices of listed stocks in
1929, and the Great Depression that followed, Congress
enacted the Securities Act of 1933 (1933 Act), 48 Stat. 74,
and the Securities Exchange Act of 1934 (1934 Act), 48 Stat.
881. Since their enactment, these two statutes have an
chored federal regulation of vital elements of our economy.
Securities and Exchange Commission (SEC) Rule 10b–5,
17 CFR § 240.10b–5 (2005), promulgated in 1942 pursuant to
§ 10(b) of the 1934 Act, 15 U. S. C. § 78j(b), is an important
part of that regulatory scheme. The Rule, like § 10(b) itself,4
broadly prohibits deception, misrepresentation, and fraud “in
connection with the purchase or sale of any security.” 5 The
4 Section 10(b) provides as follows:
“It shall be unlawful for any person, directly or indirectly, by the use of
any means or instrumentality of interstate commerce or of the mails, or
of any facility of any national securities exchange—
. . . . .
“(b) To use or employ, in connection with the purchase or sale of any
security registered on a national securities exchange or any security not
so registered . . . any manipulative or deceptive device or contrivance in
contravention of such rules and regulations as the [SEC] may prescribe
as necessary or appropriate in the public interest or for the protection of
investors.” 15 U. S. C. § 78j(b).
5 The text of the Rule is as follows:
“It shall be unlawful for any person, directly or indirectly, by the use of
any means or instrumentality of interstate commerce, or of the mails or
of any facility of any national securities exchange,
“(a) To employ any device, scheme, or artifice to defraud,
. . . . .
“(b) To make any untrue statement of a material fact or to omit to state
a material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not misleading, or

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SEC has express statutory authority to enforce the Rule.
See 15 U. S. C. § 78u (2000 ed. and Supp. III). Although no
such authority is expressly granted to private individuals in
jured by securities fraud, in 1946 Judge Kirkpatrick of the
United States District Court for the Eastern District of
Pennsylvania, relying on “the general purpose” of the Rule,
recognized an implied right of action thereunder. Kardon
v. National Gypsum Co., 69 F. Supp. 512, 514. His holding
was adopted by an “overwhelming consensus of the District
Courts and Courts of Appeals,” Blue Chip Stamps, 421 U. S.,
at 730, and endorsed by this Court in Superintendent of Ins.
of N. Y. v. Bankers Life & Casualty Co., 404 U. S. 6 (1971).
A few years after Kardon was decided, the Court of Ap
peals for the Second Circuit limited the reach of the private
right of action under Rule 10b–5. In Birnbaum v. Newport
Steel Corp., 193 F. 2d 461 (1952), a panel composed of Chief
Judge Swan and Judges Augustus and Learned Hand upheld
the dismissal of a suit brought on behalf of a corporation and
a class of its stockholders alleging that fraud “in connection
with” a director’s sale of his controlling block of stock to
third parties violated Rule 10b–5. The court held that the
Rule could only be invoked by a purchaser or seller of securi
ties to remedy fraud associated with his or her own sale or
purchase of securities, and did not protect those who neither
purchased nor sold the securities in question but were in
stead injured by corporate insiders’ sales to third parties.
Id., at 464. While the Birnbaum court did not question the
plaintiffs’ “standing” to enforce Rule 10b–5, later cases
treated its holding as a standing requirement. See Eason
v. General Motors Acceptance Corp., 490 F. 2d 654, 657
(CA7 1973).
“(c) To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any person,
“in connection with the purchase or sale of any security.” 17 CFR
§ 240.10b–5 (2005).

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By the time this Court first confronted the question, lit
erally hundreds of lower court decisions had accepted
“Birnbaum’s conclusion that the plaintiff class for purposes
of § 10(b) and Rule 10b–5 private damage actions is limited
to purchasers and sellers.” Blue Chip Stamps, 421 U. S.,
at 731–732. Meanwhile, however, cases like Bankers Life &
Casualty Co. had interpreted the coverage of the Rule more
broadly to prohibit, for example, “deceptive practices touch
ing [a victim’s] sale of securities as an investor.” 404 U. S.,
at 12–13 (emphasis added); see Eason, 490 F. 2d, at 657 (col
lecting cases). The “judicial oak which ha[d] grown from
little more than a legislative acorn,” as then-Justice Rehn
quist described the rules governing private Rule 10b–5 ac
tions, Blue Chip Stamps, 421 U. S., at 737, had thus devel
oped differently from the law defining what constituted a
substantive violation of Rule 10b–5. Ultimately, the Court
had to decide whether to permit private parties to sue for
any violation of Rule 10b–5 that caused them harm, or in
stead to limit the private remedy to plaintiffs who were
themselves purchasers or sellers.
Relying principally on “policy considerations” which the
Court viewed as appropriate in explicating a judicially
crafted remedy, ibid., and following judicial precedent rather
than “the many commentators” who had criticized the
Birnbaum rule as “an arbitrary restriction which unreason
ably prevents some deserving plaintiffs from recovering
damages,” 421 U. S., at 738, the Court in Blue Chip Stamps
chose to limit the private remedy. The main policy consid
eration tipping the scales in favor of precedent was the wide
spread recognition that “litigation under Rule 10b–5 pre
sents a danger of vexatiousness different in degree and in
kind from that which accompanies litigation in general.”
Id., at 739. Even weak cases brought under the Rule may
have substantial settlement value, the Court explained, be
cause “[t]he very pendency of the lawsuit may frustrate or
delay normal business activity.” Id., at 740. Cabining the
private cause of action by means of the purchaser-seller limi

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tation would, in the Court’s view, minimize these ill effects.
The limitation of course had no application in Government
enforcement actions brought pursuant to Rule 10b–5. See
id., at 751, n. 14.
III
Policy considerations similar to those that supported the
Court’s decision in Blue Chip Stamps prompted Congress, in
1995, to adopt legislation targeted at perceived abuses of the
class-action vehicle in litigation involving nationally traded
securities. While acknowledging that private securities liti
gation was “an indispensable tool with which defrauded in
vestors can recover their losses,” the House Conference Re
port accompanying what would later be enacted as the
Private Securities Litigation Reform Act of 1995 (Reform
Act), 109 Stat. 737 (codified at 15 U. S. C. §§ 77z–1 and 78u–4),
identified ways in which the class-action device was being
used to injure “the entire U. S. economy.” H. R. Conf. Rep.
No. 104–369, p. 31 (1995). According to the Report, nuisance
filings, targeting of deep-pocket defendants, vexatious dis
covery requests, and “manipulation by class action lawyers
of the clients whom they purportedly represent” had become
rampant in recent years. Ibid. Proponents of the Reform
Act argued that these abuses resulted in extortionate settle
ments, chilled any discussion of issuers’ future prospects, and
deterred qualified individuals from serving on boards of di
rectors. Id., at 31–32.
Title I of the Reform Act, captioned “Reduction of Abusive
Litigation,” represents Congress’ effort to curb these per
ceived abuses. Its provisions limit recoverable damages
and attorney’s fees, provide a “safe harbor” for forward
looking statements, impose new restrictions on the selection
of (and compensation awarded to) lead plaintiffs, mandate
imposition of sanctions for frivolous litigation, and authorize
a stay of discovery pending resolution of any motion to dis
miss. See 15 U. S. C. § 78u–4. Title I also imposes height
ened pleading requirements in actions brought pursuant to
§ 10(b) and Rule 10b–5; it “insists that securities fraud com

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plaints ‘specify’ each misleading statement; that they set
forth the facts ‘on which [a] belief ’ that a statement is mis
leading was ‘formed’; and that they ‘state with particularity
facts giving rise to a strong inference that the defendant
acted with the required state of mind.’ ” Dura Pharmaceu
ticals, Inc. v. Broudo, 544 U. S. 336, 345 (2005) (quoting 15
U. S. C. §§ 78u–4(b)(1), (2)).
The effort to deter or at least quickly dispose of those suits
whose nuisance value outweighs their merits placed special
burdens on plaintiffs seeking to bring federal securities
fraud class actions. But the effort also had an unintended
consequence: It prompted at least some members of the
plaintiffs’ bar to avoid the federal forum altogether. Rather
than face the obstacles set in their path by the Reform Act,
plaintiffs and their representatives began bringing class ac
tions under state law, often in state court. The evidence
presented to Congress during a 1997 hearing to evaluate the
effects of the Reform Act suggested that this phenomenon
was a novel one; state-court litigation of class actions involv
ing nationally traded securities had previously been rare.
See H. R. Rep. No. 105–640, p. 10 (1998); S. Rep. No. 105–182,
pp. 3–4 (1998). To stem this “shif[t] from Federal to State
courts” and “prevent certain State private securities class
action lawsuits alleging fraud from being used to frustrate
the objectives of ” the Reform Act, SLUSA §§ 2(2), (5), 112
Stat. 3227, Congress enacted SLUSA.
IV
The core provision of SLUSA reads as follows: 6
“Class Action Limitations.—No covered class ac
tion based upon the statutory or common law of any
State or subdivision thereof may be maintained in any
State or Federal court by any private party alleging—
6 SLUSA amends the 1933 Act and the 1934 Act in substantially identical
ways. For convenience and because they are more pertinent here, we
quote the amendments to the 1934 Act.

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“(A) a misrepresentation or omission of a material
fact in connection with the purchase or sale of a covered
security; or
“(B) that the defendant used or employed any manip
ulative or deceptive device or contrivance in connection
with the purchase or sale of a covered security.” Id., at
3230 (codified as amended at 15 U. S. C. § 78bb(f)(1)).7
A “covered class action” is a lawsuit in which damages are
sought on behalf of more than 50 people.8 A “covered secu
rity” is one traded nationally and listed on a regulated na
tional exchange.9 Respondent does not dispute that both
7 Another key provision of the statute makes all “covered class actions”
filed in state court removable to federal court. 112 Stat. 3230 (codified at
15 U. S. C. § 78bb(f)(2)).
8 “The term ‘covered class action’ means—
“(i) any single lawsuit in which—
“(I) damages are sought on behalf of more than 50 persons or prospec
tive class members, and questions of law or fact common to those persons
or members of the prospective class, without reference to issues of individ
ualized reliance on an alleged misstatement or omission, predominate over
any questions affecting only individual persons or members; or
“(II) one or more named parties seek to recover damages on a repre
sentative basis on behalf of themselves and other unnamed parties simi
larly situated, and questions of law or fact common to those persons or
members of the prospective class predominate over any questions affect
ing only individual persons or members; or
“(ii) any group of lawsuits filed in or pending in the same court and
involving common questions of law or fact, in which—
“(I) damages are sought on behalf of more than 50 persons; and
“(II) the lawsuits are joined, consolidated, or otherwise proceed as a
single action for any purpose.” 112 Stat. 3232 (codified at 15 U. S. C.
§ 78bb(f)(5)(B)).
9 “The term ‘covered security’ means a security that satisfies the stand
ards for a covered security specified in paragraph (1) or (2) of section 18(b)
of the Securities Act of 1933, at the time during which it is alleged that
the misrepresentation, omission, or manipulative or deceptive conduct
occurred . . . .” 112 Stat. 3232 (codified at 15 U. S. C. § 78bb(f)(5)(E)).
Section 18(b) of the 1933 Act in turn defines “covered security” to include
securities traded on a national exchange. § 77r(b).

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the class and the securities at issue in this case are “covered”
within the meaning of the statute, or that the complaint al
leges misrepresentations and omissions of material facts.
The only disputed issue is whether the alleged wrongdoing
was “in connection with the purchase or sale” of securities.
Respondent urges that the operative language must be
read narrowly to encompass (and therefore pre-empt) only
those actions in which the purchaser-seller requirement of
Blue Chip Stamps is met. Such, too, was the Second Cir
cuit’s view. But insofar as the argument assumes that the
rule adopted in Blue Chip Stamps stems from the text of
Rule 10b–5—specifically, the “in connection with” language,
it must be rejected. Unlike the Birnbaum court, which re
lied on Rule 10b–5’s text in crafting its purchaser-seller limi
tation, this Court in Blue Chip Stamps relied chiefly, and
candidly, on “policy considerations” in adopting that limita
tion. 421 U. S., at 737. The Blue Chip Stamps Court pur
ported to define the scope of a private right of action under
Rule 10b–5—not to define the words “in connection with
the purchase or sale.” Id., at 749 (“No language in either
[§ 10(b) or Rule 10b–5] speaks at all to the contours of a pri
vate cause of action for their violation”). Any ambiguity on
that score had long been resolved by the time Congress
enacted SLUSA. See United States v. O’Hagan, 521 U. S.
642, 656, 664 (1997); Holmes v. Securities Investor Protec
tion Corporation, 503 U. S. 258, 285 (1992) (O’Connor, J., con
curring in part and concurring in judgment); id., at 289–290
(Scalia, J., concurring in judgment); United States v. Naf
talin, 441 U. S. 768, 774, n. 6 (1979); see also 395 F. 3d, at 39
(acknowledging that “[t]he limitation on standing to bring [a]
private suit for damages for fraud in connection with the
purchase or sale of securities is unquestionably a distinct
concept from the general statutory and regulatory prohibi
tion on fraud in connection with the purchase or sale of
securities”).

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Moreover, when this Court has sought to give meaning to
the phrase in the context of § 10(b) and Rule 10b–5, it has
espoused a broad interpretation. A narrow construction
would not, as a matter of first impression, have been unrea
sonable; one might have concluded that an alleged fraud is
“in connection with” a purchase or sale of securities only
when the plaintiff himself was defrauded into purchasing or
selling particular securities. After all, that was the inter
pretation adopted by the panel in the Birnbaum case. See
193 F. 2d, at 464. But this Court, in early cases like Super
intendent of Ins. of N. Y. v. Bankers Life & Casualty Co.,
404 U. S. 6 (1971), and most recently in SEC v. Zandford, 535
U. S. 813, 820, 822 (2002), has rejected that view. Under our
precedents, it is enough that the fraud alleged “coincide”
with a securities transaction—whether by the plaintiff or by
someone else. See O’Hagan, 521 U. S., at 651. The requi
site showing, in other words, is “deception ‘in connection
with the purchase or sale of any security,’ not deception of
an identifiable purchaser or seller.” Id., at 658. Notably,
this broader interpretation of the statutory language com
ports with the longstanding views of the SEC. See Zand
ford, 535 U. S., at 819–820.10
Congress can hardly have been unaware of the broad con
struction adopted by both this Court and the SEC when it
imported the key phrase—“in connection with the purchase
or sale”—into SLUSA’s core provision. And when “judicial
interpretations have settled the meaning of an existing stat
utory provision, repetition of the same language in a new
statute indicates, as a general matter, the intent to incorpo
rate its . . . judicial interpretations as well.” Bragdon v.
10 In Zandford, we observed that the SEC has consistently “maintained
that a broker who accepts payment for securities that he never intends to
deliver, or who sells customer securities with intent to misappropriate the
proceeds, violates § 10(b) and Rule 10b–5.” 535 U. S., at 819. Here, too,
the SEC supports a broad reading of the “in connection with” language.

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Abbott, 524 U. S. 624, 645 (1998); see Cannon v. University of
Chicago, 441 U. S. 677, 696–699 (1979). Application of that
presumption is particularly apt here; not only did Congress
use the same words as are used in § 10(b) and Rule 10b–5,
but it used them in a provision that appears in the same
statute as § 10(b). Generally, “identical words used in dif
ferent parts of the same statute are . . . presumed to have
the same meaning.” IBP, Inc. v. Alvarez, 546 U. S. 21, 34
(2005).
The presumption that Congress envisioned a broad con
struction follows not only from ordinary principles of statu
tory construction but also from the particular concerns that
culminated in SLUSA’s enactment. A narrow reading of the
statute would undercut the effectiveness of the 1995 Reform
Act and thus run contrary to SLUSA’s stated purpose, viz.,
“to prevent certain State private securities class action law
suits alleging fraud from being used to frustrate the objec
tives” of the 1995 Act. SLUSA § 2(5), 112 Stat. 3227. As
the Blue Chip Stamps Court observed, class actions brought
by holders pose a special risk of vexatious litigation. 421
U. S., at 739. It would be odd, to say the least, if SLUSA
exempted that particularly troublesome subset of class ac
tions from its pre-emptive sweep. See Kircher, 403 F. 3d,
at 484.
Respondent’s preferred construction also would give rise
to wasteful, duplicative litigation. Facts supporting an ac
tion by purchasers under Rule 10b–5 (which must proceed in
federal court if at all) typically support an action by holders
as well, at least in those States that recognize holder claims.
The prospect is raised, then, of parallel class actions proceed
ing in state and federal court, with different standards gov
erning claims asserted on identical facts. That prospect,
which exists to some extent in this very case,11 squarely con
11 See 2003 WL 1872820, *1 (SDNY, Apr. 10, 2003) (observing that
Dabit’s holder claims rested “on the very same alleged series of transac

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flicts with the congressional preference for “national stand
ards for securities class action lawsuits involving nationally
traded securities.” SLUSA § 2(5), 112 Stat. 3227.12
In concluding that SLUSA pre-empts state-law holder
class-action claims of the kind alleged in Dabit’s complaint,
we do not lose sight of the general “presum[ption] that Con
gress does not cavalierly pre-empt state-law causes of ac
tion.” Medtronic, Inc. v. Lohr, 518 U. S. 470, 485 (1996).
But that presumption carries less force here than in other
contexts because SLUSA does not actually pre-empt any
state cause of action. It simply denies plaintiffs the right to
use the class-action device to vindicate certain claims. The
Act does not deny any individual plaintiff, or indeed any
group of fewer than 50 plaintiffs, the right to enforce any
state-law cause of action that may exist.
Moreover, the tailored exceptions to SLUSA’s pre-emptive
command demonstrate that Congress did not by any means
act “cavalierly” here. The statute carefully exempts from
its operation certain class actions based on the law of the
State in which the issuer of the covered security is incorpo
rated, actions brought by a state agency or state pension
plan, actions under contracts between issuers and indenture
trustees, and derivative actions brought by shareholders on
behalf of a corporation. 15 U. S. C. §§ 78bb(f)(3)(A)–(C),
(f)(5)(C). The statute also expressly preserves state ju
risdiction over state agency enforcement proceedings.
§ 78bb(f)(4). The existence of these carve-outs both evinces
congressional sensitivity to state prerogatives in this field
tions and occurrences asserted in the federal securities actions” filed
against Merrill Lynch).
12 See H. R. Rep. No. 105–640, p. 10 (1998) (the “solution” to circumven
tion of the Reform Act “is to make Federal court the exclusive venue for
securities fraud class action litigation”); S. Rep. No. 105–182, p. 3 (1998)
(identifying “the danger of maintaining differing federal and state stand
ards of liability for nationally-traded securities”).

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and makes it inappropriate for courts to create additional,
implied exceptions.
Finally, federal law, not state law, has long been the princi
pal vehicle for asserting class-action securities fraud claims.
See, e. g., H. R. Conf. Rep. No. 105–803, p. 14 (1998) (“Prior
to the passage of the Reform Act, there was essentially no
significant securities class action litigation brought in State
court”).13 More importantly, while state-law holder claims
were theoretically available both before and after the deci
sion in Blue Chip Stamps, the actual assertion of such claims
by way of class action was virtually unheard of before
SLUSA was enacted; respondent and his amici have identi
fied only one pre-SLUSA case involving a state-law class ac
tion asserting holder claims.14 This is hardly a situation,
then, in which a federal statute has eliminated a historically
entrenched state-law remedy. Cf. Bates v. Dow Agro
sciences LLC, 544 U. S. 431, 449 (2005) (observing that a
“long history” of state-law tort remedy “add[ed] force” to the
presumption against pre-emption).
V
The holder class action that respondent tried to plead, and
that the Second Circuit envisioned, is distinguishable from a
13 Respondent points out that the Court in Blue Chip Stamps v. Manor
Drug Stores, 421 U. S. 723 (1975), identified as a factor mitigating any
unfairness caused by adoption of the purchaser-seller requirement that
“remedies are available to nonpurchasers and nonsellers under state law.”
Id., at 738, n. 9. He argues that this supports a narrow construction of
SLUSA’s pre-emption provision. But we do not here revisit the Blue
Chip Stamps Court’s understanding of the equities involved in limiting
the availability of private remedies under federal law; we are concerned
instead with Congress’ intent in adopting a pre-emption provision, the
evident purpose of which is to limit the availability of remedies under
state law.
14 See Brief for Respondent 5 (citing Weinberger v. Kendrick, 698 F. 2d
61, 78 (CA2 1982) (approving a settlement that included holder claims
brought pursuant to New York law)); see also Tr. of Oral Arg. 34–35.

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typical Rule 10b–5 class action in only one respect: It is
brought by holders instead of purchasers or sellers. For
purposes of SLUSA pre-emption, that distinction is irrele
vant; the identity of the plaintiffs does not determine
whether the complaint alleges fraud “in connection with the
purchase or sale” of securities. The misconduct of which re
spondent complains here—fraudulent manipulation of stock
prices—unquestionably qualifies as fraud “in connection with
the purchase or sale” of securities as the phrase is defined in
Zandford, 535 U. S., at 820, 822, and O’Hagan, 521 U. S.,
at 651.
The judgment of the Court of Appeals for the Second Cir
cuit is vacated, and the case is remanded for further proceed
ings consistent with this opinion.
It is so ordered.
Justice Alito took no part in the consideration or deci
sion of this case.